Oslo-based Wallenius Wilhelmsen is taking decisive action to ready for the choppy waters ahead stemming from the impact of the COVID-19 on the global economy.
The group said it would withdraw the proposed dividend for 2019, recycle up to four vessels, all 24 years old or older, and place up to 10 vessels in cold lay-up to mitigate vessel overcapacity at the company.
The proposed dividend would have been equivalent to about USD 60 million.
“The world has changed dramatically over the past weeks, and we are all feeling the effect. The impact these events will have on the world economy and global supply chains remains unpredictable, but it is increasingly clear that current events will have longer term impacts. Our strong focus on synergies and cost efficiency over the past years have put us in a solid liquidity position, but we are taking early precautionary steps now, to preserve cash,” says Craig Jasienski, President & CEO of Wallenius Wilhelmsen.
Wallenius Wilhelmsen said that its overcapacity equaled to a fleet of 10-15 vessels net of already planned redelivery of charter vessels. Hence, the decision to recycle older vessels and reduce operational costs for the fleet.
“The vessels will undergo green recycling in line with the group’s long-standing policy and be reported accordingly to the Ship Recycling Transparency Initiative. The early recycling is expected to lead to a potential impairment of up to USD 40 million,” the company added.
The company is also preparing to place up to 10 vessels in cold lay-up and thus secure further cost reductions.
The estimated cost saving for a vessel in cold lay-up is USD 3-4,000 per day depending on length of lay-up.
Wallenius Wilhelmsen added that of the 11 vessels available for redelivery at the start of the year, four have been redelivered and another three will be redelivered before the end of June.
One vessel has been extended and the remaining three are under consideration.
Wallenius Wilhelmsen has two newbuildings under construction that will be further delayed due to the disruption COVID-19 is causing. Both vessels have secured financing which can be drawn at delivery, the company pointed out.
The RORO shipping specialist said that given the uncertainity caused by the global pandemic, its management has reduced capex spend to a minimum, prioritizing safety and maintenance of critical expenditures.
This includes deferring some larger expansion projects in the company’s landbased operations as well as the cancellation of four of the remaining scrubber installations.
“As the COVID-19 pandemic continues to progress and mitigating actions by authorities evolve quickly, supply chains are being hit hard and vehicle producers are shutting down plants around the world. We continue to actively monitor the situation and its ongoing effects on the global supply chain and will adjust our approach as necessary in line with developments,” the shipping company concludes.